Plan A: SVL offfers to let flexon pay 55,000 each year for six years. The payments include interest at 14% per year Plan B: Easternhouse will let flexon make a single payment of 525,000 at the end six years. This payment includes both principal and interest at 14%.
Requirements:
1. Calculate the present value of plan A.
2. Calculate the present value of plan B.
3. Flexon will purchase the equipment that costs the least, as measured by present value. Which equipment should Flexon choose? Why?